Buyer Pre-Qualification -
For any Buyer that is planning to purchase a home and will need to have financing from an outside source, it is in the best interest of the Buyer to be pre-qualified ... There are many reasons for this.
Pre-Qualification means having a lender who makes home loans review your financial standing in order to determine the feasibility of making the individual or individuals involved a home loan. Generally speaking, this involves running a credit check and doing an analysis of your current income and debt structure.
Even though this is only a preliminary step it usually gives the Buyer a good idea if they can qualify for the size and type of home they are interested in while staying within their budget and means. However, Pre-Qualified does not necessarily mean Pre-Approved, so if the Buyer is serious about moving forward with the Approval process at the same time.
After the pre-qualification is complete, the next step is to actually submit a written application and necessary documentation for an Approval. To have the lender's approval means that everything on the Buyer's side is completed and has been signed off by the underwriter. At this point, the lender will usually issue an Approval Letter the Buyer and their Agent can use to submit offers.
Knowing the Buyer is actually Approved for a loan and determining the amount that they are qualified for takes the stress off the Buyer and allows them to negotiate better with a Seller. While an approval for the Buyer is not the final step, the Seller is put at ease with some degree of surety that the Buyer will be able to complete the transaction when it is time to close. There are other hurdles in the process of purchasing besides getting the money together. Another part of the approval depends on the property itself. Prior to making a loan, the lender will require an independent appraisal of the property to justify the loan amount and value of the home.
The other benefits of having a pre-approval for the Buyer are knowing what homes they can consider and eliminating the uncertainty about whether or not they will have the necessary funding. Buyers have enough to be concerned about in the home selection process and having doubts about financing should not be one of them. Approval letters from the lender strengthen offers and may often be a determining factor in the Seller accepting a Buyer's offer to purchase, especially in situations where the Seller may have received multiple offers.
If have any questions about what documentation you will need or if you would like to begin the qualification process, I suggest contacting one of my trusted contacts listed here (Link to be Added)